TOKYO Japan's exports rose in March from a year earlier for the first time in six months, mainly on the strength of U.S. sales, but high fuel imports pushed the trade balance back into deficit and manufacturers remain cautious about business in months ahead.

Reflecting rekindled worries about Europe's debt crisis and concerns the yen could rally again, manufacturing confidence dipped in April after a sharp rebound the previous month, a Reuters poll showed.

The subdued sentiment suggested the Bank of Japan will remain under pressure to ease monetary policy further when it meets on April 27 to support the fragile economic recovery.

Exports rose 1.2 percent in seasonally adjusted terms in March and 5.9 percent from a year earlier, compared with economists' median forecast of a steady reading, as U.S.-bound shipments grew at the fastest pace in nearly two years on auto demand. JPEXPY=ECI

Imports soared 10.5 percent in the 12 months to March, pushing the trade balance into deficit after it posted a surplus in February. JPIMPY=ECI However, the gap of 82.6 billion yen ($1.0 billion), came well below analysts' forecast of 220 billion yen. In January, Japan recorded its biggest ever trade deficit of 1.476 trillion yen. JPTBAL=ECI

Japan's trade balance is expected to remain in deficit in coming months as it imports more oil and natural gas to offset the loss of nuclear power supply, which could start eroding its vast savings and hamper its ability to finance huge public debt.

"Exports to the United States grew but shipments to China remained weak, so Japanese exports will struggle unless China, which is Japan's biggest export destination, achieves economic recovery," said Takeshi Minami, chief economist at the Norinchukin Research Institute in Tokyo.

Manufacturers face a worsening plight in trade with other countries due to oil price rises, which boost raw material costs, and the yen's stubborn strength, as highlighted by the Reuters tankan, he said.

"These indicators will further back up calls for monetary easing by the Bank of Japan."

In the monthly Reuters Tankan for April, the manufacturers' sentiment index, derived by subtracting the percentage of pessimistic responses from optimistic ones, slid one point to plus one, holding barely above zero for the second straight month.JPRTAN=ECI

Yet the survey also showed that non-manufacturers, such as construction and transportation companies, were much more optimistic and their sentiment index jumped to plus 10, a level last recorded in 2007, buoyed by demand generated by rebuilding after last year's devastating earthquake and tsunami.

PRESSURE FOR POLICY STIMULUS

"While there is a clear boost from reconstruction, uncertainties remain about the Japanese economy's outlook," said Yuichi Kodama, economist at Meiji Yasuda Life Insurance.

"Higher raw material costs, a renewed yen rise and the lack of bright signs in China's markets have caused recovery in manufacturer sentiment to pause."

The monthly Reuters poll is highly correlated with the central bank's quarterly tankan survey, which serves the BOJ as a key gauge of economic activity. The last survey published earlier this month showed no improvement in business sentiment in the first quarter and big manufacturers expecting only a modest pick-up in coming months.

Both surveys suggest the central bank will remain under pressure to deliver more policy stimulus as the economy is not picking up fast enough to push inflation steadily toward the central bank's 1 percent goal.

Sources familiar with the central bank's thinking told Reuters earlier this month it would consider easing policy further at its rate review next week by boosting government bond purchases through its asset-buying and loan scheme.

Last year Japan logged its first annual trade deficit in 31 years following the March earthquake that crippled supply chains and triggered the world's worst nuclear crisis in 25 years, boosting fuel imports to make up for loss of nuclear power.

Japan's economy is expected to grow around 2 percent in the current fiscal year to March 2013 as rebuilding from the earthquake gets into full swing. ($1 = 81.3100 Japanese yen)

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